Joe Biden Says Debt Deal ‘Very Close’ As Default Date Extended To June 5

US President Joe Biden said on Friday that he was “optimistic” for a deal on the debt ceiling and that he was “very close” to a settlement on the issue. The development comes as the deadline for a potentially catastrophic default has been extended to June 5. The US debt ceiling, or limit, sets the maximum amount of federal debt owed by the US government. On Friday, Joe Biden told reporters, according to AFP, “It’s very close and I’m optimistic. I hope we’ll know by tonight if we can make a deal.”

The news agency said the development was the most hopeful sign yet that the political turmoil in the US could be ending, enabling the government to borrow funds and avoid the potentially devastating consequences of default.

Such defaults could result in recession, significant job losses and economic slowdown, the report added.

Earlier on Thursday, US Treasury Secretary Janet Yellen told Congress that the country could default on its debt obligations by June 5 if lawmakers do not come to a resolution for the federal debt ceiling, four days later than previously estimated, the news agency noted. .

In a letter to House Speaker Kevin McCarthy, Yellen wrote, “We now estimate that the Treasury will have insufficient resources to meet the government’s obligations if Congress does not raise or suspend the debt ceiling by June 5.”

“Waiting until the last minute to suspend or raise the debt limit could seriously damage business and consumer confidence, increase short-term borrowing costs for taxpayers and negatively impact the United States’ credit rating,” she said. .

Also read: No deal yet in ‘productive’ talks: Understanding the ongoing US debt ceiling and congressional impasse

What are the sticking points?

Raising the limit is an annual accounting maneuver that is usually passed with relatively little notice, the report said. However, with a majority in Congress this year, the Republican Party is using it as leverage to push for a rollback of Democratic spending priorities, turning it into a contentious issue.

According to a report by the AP news agency, a major obstacle in the negotiations is the GOP’s push to increase work requirements for recipients of federal aid programs, including food stamps, which Democrats strongly oppose.

The report said the White House strongly opposes the GOP proposals, with spokesman Andrew Bates slamming them as “cruel and senseless.” Louisiana Rep. House Speaker Kevin McCarthy’s negotiator. Garrett Graves made it clear that Republicans will not back down on this issue.

Negotiations reached an impasse on Friday over work requirements for Medicaid, food stamps and other assistance programs, the report said. President Biden opposed work requirements for Medicaid but initially expressed openness to possible changes to food stamps (SNAP).

The Republican proposal aims to save $11 billion over 10 years by raising the maximum age for work requirements and reducing state exemptions, the report said. By Friday, Biden’s position on SNAP work requirements had strengthened, with the White House criticizing House Republicans for jeopardizing the economy by trying to take food from hungry Americans.

Any agreement would require compromise and support from both Democrats and Republicans in Congress. Failure to raise the borrowing limit, which currently stands at $31 trillion, would have serious consequences for the US and global economy.

Debt ceiling negotiations also include a framework for spending cuts in 2024 and a 1 percent cap on spending growth in 2025, which is taking shape as negotiations continue. However, some provisions are still unresolved. GOP lawmakers are also expected to reclaim about $30 billion in unspent COVID-19 funds now that the pandemic crisis is over.

According to unconfirmed US media reports, the deal being shaped would include an agreement to extend the government’s borrowing authority for two years, meaning there would be no repeat of the current drama before the 2024 presidential election, AFP reported.

According to the AP report, US congressional Republicans have left Washington for the Memorial Day holiday, increasing pressure on the negotiations. The exact date of the legislators’ return remains uncertain, though they tentatively plan to reconvene on Tuesday.

Despite weeks of negotiations, no deal could be reached between Republicans and the White House.

The Biden administration has been resistant to using the debt limit as leverage for other partisan priorities. The focus remains on cost reduction compared to the previous year.

A “snap-back” provision to implement the cuts is being considered if Congress fails to meet new budget targets during the appropriations process, the report said.